Cálculo del refuerzo

Policy Objectives and the Law

Cities regulate meter rates primarily to protect consumers. In the absence of regulation, passengers would not be able to assess a fair price given the variable nature of the service in terms of both distance and quality of vehicle and driver. Regulated rates on meters provide a convenient set guide, and avoid situations of haggling or exploitation (as on a lonely street late at night).

considered. The broader framework of common law places duties on governments when regulating the price of any product or service; prices must be set high enough to allow firms in the industry the opportunity to make a fair and reasonable rate of return on their investment. To do this the cost conditions of the industry must be considered. Cities typically change taxi meter rates in response to changes in industry costs.

Another relevant consideration is the value of a taxi plate within jurisdiction. When people are willing to pay to enter an industry, it is evidence that returns to capital are higher than generally available – so that the regulator’s duty to permit just and reasonable returns is met. Thus the fact that Sudbury’s plates have positive value is evidence that– the duty in law is met.

In the presence of plate value, cities generally still manage meter rates on a relative basis, responding to industry costs. A well-managed rate provides a predictable environment in which all industry

participants can plan for the future. If rates are left unadjusted while costs rise, service is disrupted while industry players resolve who is bearing the burden, and stakeholders do not make the needed long run investments in equipment and service.

Hara Associates

Table 4: Meter Rates

Distance Per KM cost Per hour cost 5km Fare (no time) 35km Fare (no time) Formula for Update Timmins $3.60 100m $1.75 $36.0 (charged instead of distance) $12.18 $64.68 × North Bay $4.20 100m $1.92 $34.41 $13.62 $71.26 √ CPI Sault Ste. Marie >=$3.90 100m $1.50- $2.50 $30.00 $11.25- $16.15 (min drop) $56.25 × Thunder Bay $4.15 62.5m $2.50 $45.0 $16.49 $91.49 × Barrie $3.25 100m $2.50 $30.00 $15.50 $90.50 √ CPI Kingston and Loyalist $2.85 77m $1.30 $27.70 $9.24 $48.20 × Sudbury $3.50 250m $2.23 ?? $14.10 $81.07 √ Local gas prices

Although rates are set for the benefit of the consumer, the concerns of the industry also must be considered. The broader framework of common law places duties on governments when regulating the price of any product or service; prices must be set high enough to allow firms in the industry the opportunity to make a fair and reasonable rate of return on their investment. To do this the cost conditions of the industry must be considered. Cities typically change taxi meter rates in response to changes in industry costs.

Another relevant consideration is the value of a taxi plate within jurisdiction. When people are willing to pay to enter an industry, it is evidence that returns to capital are higher than generally available – so that the regulator’s duty to permit just and reasonable returns is met. Thus the fact that Sudbury’s plates have positive value is evidence that– the duty in law is met.

In the presence of plate value, cities generally still manage meter rates on a relative basis, responding to industry costs. A well-managed rate provides a predictable environment in which all industry

participants can plan for the future. If rates are left unadjusted while costs rise, service is disrupted while industry players resolve who is bearing the burden, and stakeholders do not make the needed long run investments in equipment and service.

Sudbury Meter Rates Compared to Peers

Determining whether Sudbury’s current meter rates reflect recent changes in taxi operating costs requires on-site engagement with Sudbury stakeholders that is beyond the scope of this study. The cost of operation in each city is different. For example, taxi insurance rates have risen sharply in some parts of Ontario, less so in others. However, we can comment on where Sudbury stands in relation to its peers.

Hara Associates

Figures 7 and 8 compare Sudbury’s meter rates for short-haul (5 kilometer) and long-haul (35 kilometer).18 The range of meter rates is quite broad. Sudbury falls in the upper third. Rates in Thunder Bay and Barrie are higher, while rates in the other four peer cities are lower.

18

Distances are calculated based on the rate per meter, rather than “on the nickel”. This avoids distortion The Timmins meter rate is estimated – the most recent published rate was adjusted upwards 8% for HST

harmonization, but a record is missing from City electronic records.

$69.85 $71.26 $56.25 $91.49 $90.50 $48.20 $81.07 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Timmins (Estimated)

North Bay Sault Ste. Marie (minimum

rate)

Thunder Bay Barrie Kingston and Loyalist County

Sudbury

Figure 8

Meter Rate for a 35 kilometer Fare

(Distance Only)

Hara Associates Managing Meter Rate Adjustments

A different question is how meter rates are reviewed and adjusted. Only two of the peers, Barrie and North Bay, undertake regular review of their meter rates. Both do so by increasing the meter rate by the previous year’s general rate of inflation as measured by the Consumer Price Index (CPI) published by Statistics Canada. The other jurisdictions carry out their reviews at the request of their local taxi

industry. Sudbury has provisions in its bylaw for meter rate adjustments to occur as often as every three months, based solely on the fluctuation in gas prices observed at any three local gas stations.

Recommendation 10: Replace method for meter adjustment rates. Sudbury’s reliance exclusively on gas prices to adjust meter rates should be replaced by an index approach capturing additional important cost elements. While gas prices have been a source of volatility in the past, the rising cost of insurance has been the biggest concern for Ontario taxi operators more recently.

Some form of indexation is highly desirable. It allows the industry to form sensible expectations about future rates. It allows consumers to do so as well. This helps avoid large and infrequent rate increases that lead to sticker shock and cause customers to avoid taxis. Regular adjustment also allows individuals who are considering giving up car ownership a more stable framework in which to budget for that choice.

Ideally, an index would be representative of the costs of providing taxi service. However, there are two common approaches. Smaller municipalities, such as those in the peer comparison, tend to use the CPI because of its convenience. The disadvantage of the CPI is that it is built around a household budget, not a taxi’s. Gas, insurance, and vehicle operating costs are included, but have a lower weight than is

realistic for taxis..

A more sophisticated approach involves developing a taxi cost index (TCI) based on local taxi operating costs Larger municipalities do this, including Toronto and Ottawa. Provincial agencies, such as the B.C. Passenger Transportation Board, also use a Taxi Cost Index. A TCI is like the consumer price index. It still can use convenient published data from Statistics Canada, but it gives more appropriate weight to gas, insurance, and other costs relating to operating taxis.. The disadvantage of a TCI is that it is more challenging for municipal staff to maintain. Errors can be made by those unfamiliar with the formula or the data sources.

The choice between a TCI and the CPI is one of accuracy versus convenience. Over time, Hara Associates has found that providing a spreadsheet tool that includes step-by-step instructions has helped

municipalities update their indexes without assistance. Either TCI or CPI would be an improvement over the Sudbury’s current reliance exclusively on gas prices.

Whichever method is chosen the end practice is similar. If the CPI has risen 2% since the previous year, then meter rates can be raised 2%, subject to stakeholder consultation (sometimes the industry will decline). The TCI is the same – an annual review based on % increase in the TCI. The major difference is that a Taxi Cost Index requires the initial step of development in consultation with Sudbury operators on their costs, while the CPI is less accurate but already made.

Hara Associates Applying the CPI

While a TCI based on costs is more accurate, it is possible to apply the CPI to Sudbury’s taxi meter rate history to see what present rates might be under this rule.

Sudbury last adjusted meter rates in July 2010. Rates were increased 8% to accommodate HST harmonization. The previous increase was in late June of 2008. The Consumer Price Index has risen 5.9% since 2008, or 7.0% if you measure from 2008.19 _{The choice of baseline is problematic.}

From one perspective, the industry has not received an adjustment for operating costs since 2008, since the 2010 adjustment was to accommodate a tax. However, the net impact of HST

harmonization was less than the 8% meter rate increase given the industry. Harmonization also lowered the costs of fuel and other inputs by providing an HST tax credit in place of the provincial sales tax that was eliminated.

Applying a 5.9% increase to meter rates would increase the 5 kilometer fare to $14.93 - leaving Sudbury’s relative ranking among other peer cities unchanged.